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South Africa in a technical recession – how does it affect you?

Oct 1, 2018

South Africa is in its ninth recession since 1961. The weakening of the economy, and thereby the rand, makes South Africa a cheap tourist destination. However, South Africans may not be able to travel the world this year.

A country enters a technical recession when the gross domestic product (GDP) decreased for two consecutive quarters. South Africa’s economic growth first decreased by 2,2% in the first quarter and then by 0,7% during the last quarter. The GDP is one of the most important economic indicators of the health of the economy in a country. But what does this mean to South Africans abroad?

Effect of the recession

If you live abroad and still have loved ones in South Africa, they will not be able to visit you soon. The biggest effect of a recession is the pressure on consumers. It depends, of course, on how long the recession continues, but the value of the rand is affected by it, which makes the import of oil more expensive and causes fuel prices to rise. What typically happens is that the value of salaries decreases and prices increase. This means consumers begin living on credit and struggle to pay their debts. South Africans will travel less, not just because of pressure on their personal finances, but also because the currencies of other countries are much more expensive. In that case, maybe you should rather visit South Africa and make your dollars count here!

Become recession resistant

What advice can you give your loved ones in South Africa?

  1. Immediately create an extra savings fund.
  2. Immediately cut your expenses.
  3. Keep on saving.

Consumers tend to live out of their savings fund during a recession. The solution should, however, be to cut your living costs as much as you can. Keep trying to save. Create an extra savings fund for all the money you usually spend on restaurants, Starbucks coffee or DSTV.

What caused the recession?

The agricultural sector was the biggest contributing factor to the negative economic growth. As a result, the rand has weakened by 10% against the dollar since August. The GDP of the agricultural sector has decreased by 29,2%. In the first quarter, agricultural production has already decreased by 33,6%. This is a drastic decline in the output of commercial farming in South Africa.

The recession is not something new; neither are government policies that harm the economy. Whether you are a South African who is already working abroad, or whether you plan to go soon, the recipe stays the same: everybody’s job is to build where he or she is. It is part of our DNA to discover new opportunities, start new businesses, and work smarter – even when the economy is suffering. Cheer up and become resistant to the recession!

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